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Dollar rises despite interest rate cut

Wed 5 Dec 2012, 9:36 AM AEDT

The Australian dollar remains stubbornly high despite the Reserve Bank's cut to the cash rate yesterday.

The RBA's been trying to take the heat out of the dollar and support exporters by cutting the cash rate, and also repeatedly warning that the local currency is overvalued relative to Australia's economic fundamentals.

However, the Australian dollar actually rose about half a cent yesterday afternoon on the rate cut and accompanying statement, when it would normally be expected to fall in line with rate reductions.

This morning, the Australian dollar was trading around 104.7 US cents at 9:27am (AEDT).

Economists warn the high currency is likely to counter some of the positive effects lower interest rates will have on industry.

"They've expressed their puzzlement over the resilience of the Australian dollar, given commodity prices aren't as high as they used to be," he observed.

The Federal Treasurer, Wayne Swan, says it is up to the Reserve Bank to decide if more interest rate cuts are needed to try to bring down the value of the dollar.

Mr Swan acknowledges the high dollar is hurting many trade exposed industries.

"Well there's no doubt that, in terms of our economy, the higher dollar does have its impact and is putting some stress and strain on a number of industrial sectors - [the] tourism sector for example - anybody who's exporting," he said.

"So it does have an impact, but in terms of future decision of the Reserve Bank that is a matter for them."